Talks in the first major US refinery strike in 35 years are looking like 'a snowball in hell'

Bob Riha, Jr./ReutersMembers of the United Steel Workers union picket the Tesoro refinery in Carson, California February 2, 2015.

At tense meetings just days before the first major U.S. refinery strike in 35 years was called on Sunday, union leaders grew increasingly pessimistic about getting a new labour contract and a sizable wage increase.

“The chances of there being an agreement are that of a snowball in hell,” one of them complained as the deadline imposed by the expiring contract loomed.

Officials from Royal Dutch Shell Plc (RDSa.L)(RDSa.N), the lead negotiator for oil companies, were repeatedly saying it would be too hard to meet the union’s demands for a new three-year contract to lift pay and tighten safety practices, several union officials told Reuters.

But what most frustrated the United Steelworkers union (USW) was something they had never seen before: an intransigent Shell.

A Shell official declined to comment on the tone and sticking points of the negotiations that broke down on Sunday, leading to walkouts. Shell negotiators had made five offers that were all rejected by the union, and the company said on Sunday that it was committed to resolving differences with the USW.

Late on Monday, Shell said representatives from the company resumed communications with the union “in hopes of coming to a mutually satisfactory contract agreement.”

A union official said both sides met but no progress was made.

From the union’s standpoint, Shell has always been the most flexible of the oil companies, much easier to negotiate with than Exxon Mobil Corp (XOM.N) or Marathon Petroleum Corp (MPC.N).

In fact, the USW enjoys the right to pick which company will head up negotiations and specifically chose Shell this year for its perceived flexibility. Shell forged deals with the union in 2006, 2009 and 2012.

Those contracts were considered successes, especially after a months-long walkout in 1980, a time people still talk about as a low point for disputes in the sector.

This year, however, was different. John Abbott took over as Shell’s refining chief in 2013 and Ben van Beurden became chief executive officer in 2014.

This time, there were new faces on the negotiating team from Shell, and a 50 per cent slide in oil prices CLc1 LCOc1 since June cast a shadow over the talks as companies slashed spending.

After days of friction, Shell cut off talks on Sunday, a move that stunned the union.

“We were very, very shocked,” USW International President Leo Gerard told Reuters on Monday. “Shell has been a responsible lead company in years past. We have been able to have rational, reasonable negotiations with them.”

Feeling they had no other option, the union called a strike at nine plants with a combined 10 per cent of U.S. refining capacity.

Mystified by Shell’s change in tone from previous contract talks, some striking workers on Monday said they think that oil companies, seeing that many older refinery workers are retiring, are trying to test the strength of younger union members.

Cutting off talks that began Jan. 21 may have just been a ploy, they said, so that the companies can push for a deal that limits new costs – a move that would please nervous shareholders.

Indeed, some people picketing on Monday near Houston said Shell may have given the union a big head fake and that the company would soon reopen talks.

The union is seeking annual pay raises of 6 per cent, double the size of those in the last agreement. It also wants work that has been given in the past to non-union contractors to start going to USW members, a tighter policy to prevent workplace fatigue, and reductions in members’ out-of-pocket payments for healthcare.

This article originally appeared at Reuters. Copyright 2015. Follow Reuters on Twitter.

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